Das Beratungs- und Serviceunternehmen RRA Corporate Services begleitet seit über 15 Jahren indische und europäische Unternehmen in den Bereichen Accounting, Tax, Compliance, Unternehmensgründung und Recruiting. Im Interview mit IndienHeute erläutert Ralph Robert, Gesellschafter-Geschäftsführer, aktuelle Entwicklungen und beschreibt Better Practices bei spezifischen Herausforderungen für westliche Unternehmen.
IndienHeute: What do you think are the key challenges that face European companies setting up in India and are these challenges different for companies of different sizes?
Ralph Robert: While India might have its own uniqueness, I believe, that the challenges a company would face in setting up shop in India are broadly similar to the challenges a company would face with any other global expansion. I think understanding the local market and local business practices, getting familiar with local laws, regulations and cultural nuances etc. are challenges that are common to any global expansion and therefore one must be prepared for these challenges when one is coming to India. Since India’s transition from socialism to capitalism has been relatively recent, when compared to some of the developed countries, its policies, processes and outlook has to catch up with the developed countries and therefore these challenges seem more pronounced. Though successive governments of modern India understand these challenges and are focusing on making structural changes, for some European owners/ managers these challenges can be a very frustrating experience especially when they compare things to their home country. The present government has given itself an ambitious target of taking India from its current ranking of 130 in the World Banks ease of doing business index, to the top 50 in 5 years. This will require the government to significantly cut down on red tape and align processes to meet global standards.
I also think the challenges faced by companies of all sizes are the same. The difference lies with the company’s circumstances and their ability to sustain and cope with the challenges.
Larger companies typically have well established teams, processes and infrastructure (Global Networks of Lawyers, Accountants and Head hunters etc.) which helps them deal with some of the challenges. Even if this is not there, the larger and better established companies have owners/ managers who have the experience of dealing with expansions in other countries and the significant learnings that have come out of such previous experiences. This “institutional framework” and “institutional learning” very often is the big differentiator between the larger company and the small/ medium sized company. Larger companies also have it easier as they have deeper pockets and therefore can remain committed for longer and can sustain a couple of false starts. That being said, I have rarely seen a company (small/ medium) with the right attitude and the right approach fail with their India venture. You are more likely to see failure when companies/owners/managers have a flawed attitude / approach.
IndienHeute: What’s your key advice to European companies when they set up shop in India, please give us your TOP 3.
Ralph Robert: A lot of what I am going to say is going to seem very basic but you will be surprised as to how few follow the basics. My answers are also going to be keeping the small and medium sized companies in mind.
There are 3 key things that I would tell clients coming to India:-
First, Do your homework:
Don’t have preconceived notions on India and don’t believe everything that people tell you- it is very often coloured by their individual experiences. Therefore do a detailed study:
– Make a couple of visits to India to make yourself aware of what you are getting into and talk to a wider group of people to ascertain facts.
– Prepare detailed budgets, road maps and business plans- these should be based on credible information that you gather. Example -People are at times shocked at the rent rates and significantly high rent deposits in cities like Bangalore and Mumbai.
– Do a swat analysis of your company and its key managers who are going to drive this. They must have the skills and attitude that are relevant to making an Indian operation successful. If you are choosing a person from your head office to head the Indian operation in India (Though I don‘t recommend this approach), make sure she/he checks all the boxes. Companies sometimes choose their person for India based on a very frivolous reasoning- in one case (which was probably extreme), I was surprised to hear that one of the key reason for choosing a particular manager was because he liked /could manage Indian food. While these might be stray cases, you will see that many of the companies that failed did not do a detailed analysis of the managers skills and experiences before they were chosen to direct the India operations.
Second, Have the right attitude and approach:-
For a company/ manager venturing out of the home country for the first time, the setup, in a new territory, can expose the weaknesses within the company and the weakness of the manager driving the initiative. Companies that are too “closed” and without process and structure, will find the going tough, as would managers who lack clarity and decisiveness. In such cases, the company and the manager would need to reform first before they succeed. Right attitude would include:
– Be committed for the long term:-
Like all new business initiatives, your India business is most probably going to take more money, more time and more effort than you originally budgeted. While I have seen people prepared to spend more money, I have seen very few prepared for the time and effort that this India business setup is going to take. Don’t be put off by the horror stories you hear about Indian ventures – when you analyse them you will see most of the horror stories were because of bad management/ planning or ridiculously high expectations. You must remember that business success is not that common even in your home country- overcoming challenges will always be daunting. I always tell clients India is an investment- it will take time to pay dividends, don‘t treat it like a casino where you can make quick money.
– Get existing employee and manager buy-in/ acceptance:-
Companies that undertake the move to India without the support and acceptance of their key employees and managers, later on have to deal the difficulty in integrating the teams and getting the maximum out of the India venture. There should not be a perception within the organization that they are losing their jobs/ losing importance or increasing their work load by training Indian teams. This immediately translates to mistrust and blame game within the organization that can be avoided with proper preparation/ transparency.
– Don‘t be gullible but don‘t be distrusting either:-
For a small and medium sized company the setup process is going to involve dealing with completely new people (people who you have never dealt with before) building relationships is going to be key. If you are too gullible you will trust too easily (which can sometimes be very costly) and if you are distrusting you will never trust anybody (and therefore never build long term relationships).
– Be willing to learn and adapt:-
You will have to be as willing to learn as you are willing to teach. If you are open to learning you will constantly adapt yourself and your organisation to the situations that keep cropping up. Sometimes structural changes are required within the global organisation to integrate teams and make the India venture work.
– Be fair and respectful:-
For most small/ medium sized companies the India setup journey is going to probably be one of their first big moves outside their comfort zones in their home regions. The move is going to probably put pressure on the company‘s weak links. People, processes and practices that are not conducive to growth and development will start feeling the pressure of the changes- managers will have to learn to listen, understand and react to issues and problems carefully. While doing so, they will have to be fair and respectful to the new people they are dealing with and carefully consider their ideas, thoughts and suggestions as these new people might most probably have experiences that the Managers/ Owners don’t.
Third, Find your “sherpa” for India-
A “sherpa” is a member of a traditionally Buddhist people of Tibetan ancestry living on the southern side of the Himalaya Mountains in Nepal and the Indian state of Sikkim. “Sherpa” have achieved renown as high-altitude expert guides on Himalayan mountaineering expeditions. I believe that one of the most critical things for small and medium sized companies entering India is to find a “Sherpa” or guide for your India venture.
This person could be an employee, a consultant, a client, a vendor, a lawyer or a fellow business owner from your home country/ India. Your “sherpa”/guide should be someone who has experience in setting up or managing businesses in India and/or has a network you can leverage on. It should be someone who you trust, work well with and is willing to spend time with you. With his/ her experience/ network you should be able to get a fact checked, a second opinion or just bounce your ideas off. I believe that this would make a big difference while implementing your India plans as it could save you a lot of time, effort and in some cases costly errors. As your India venture develops and you have a stronger grip of things your reliance on the “sherpa” would reduce but as far as possible should not be broken -if you believe you have found the right person.
IndienHeute: What should one look for in a Sherpa and how does one find one?
Ralph Robert: Typically your Sherpa should:
– be a person of high integrity
– have specific experience in your business area
– work well with you and your home team
– have a broad experience with how business is carried on in India
– have experience in setting up and running businesses in India
– have cross cultural sensitivity and experience dealing with diverse global teams
– have a network that you can leverage (of Accountants, Lawyers, vendors etc.)
– have some knowledge of local laws, regulations and taxes
While finding someone with all the above might not be easy, it might make the difference between success and failure of your Indian venture. It is therefore worthwhile to spend some time in searching for the person.
You could ask head hunters, consultants, fellow business owners from your home country, vendors/clients you have dealt with etc. to help you shortlist possible candidates. You must however conduct detailed interviews and background checks to see if the person possesses the required background/ skill sets. Your detailed interview should assess whether the person satisfies the above stated criteria and also gels well with you and the team in the home country. Your background check could be based on talking to referrals that the shortlisted candidates provide you.